Panmure Liberum strategist Joachim Klement expects the AI investment boom to burst between 2027 and 2028, setting a S&P 500 target of 5,000 by the end of 2027 — a drop of more than 35% from current levels. He blames shrinking hyperscaler cash flow and rising debt costs tied to AI capital spending, and expects European and UK equities to suffer too.
Joachim Klement, head of market strategy at Panmure Liberum, says the AI investment boom now running through markets is a bubble likely to burst sometime between 2027 and 2028. His target for the S&P 500 is 5,000 by the end of 2027, a drop of more than 35% from the index's recent level around 7,723.
He laid out the call in forecasts published in October 2026, and the pessimism isn't limited to Wall Street — he expects European and UK equities to suffer too.
The cash behind the call
His core argument is about cash. Free cash flow at the biggest hyperscalers is shrinking, he says, while the debt costs tied to their capital spending keep climbing.
That spending is concentrated in five US companies: Amazon, Microsoft, Alphabet, Meta, and Oracle. Panmure Liberum's May 2026 analysis put their combined 2026 capital expenditure at $658 billion. To justify that spending, Klement estimates those five firms would need to add $2-5 trillion in annual revenue.
Outside estimates point the same way. Bloomberg Intelligence projects data-center spending will surpass $713 billion in 2026.
Bigger than the dotcom era
The October call builds on Panmure Liberum's earlier research, which argued the AI boom is already 60% larger than the late-1990s dotcom bubble. AI-related market gains have reached $28.6 trillion since April 2025, a 31% increase in six months. That pace has shown up only three times before in modern market history: 1987, 1999, and 2009.
Valuation adds to his case, by the P/E ratio measure. The Shiller P/E ratio sits near 40x, well above its historical average.
Klement has been consistent about where he stands. During an August 2026 appearance on CNBC, he described himself as "very bearish" on AI capex.
Two scenarios, two depths of pain
Klement outlines two paths. A pullback of 4.5-6% in tech spending could send the S&P 500 down 20%, with European and UK markets falling more than 30% in the same scenario.
The more severe case is a full dotcom-style crash. In that scenario, tech hardware stocks could plunge by more than 70%.
Klement says the variable to watch is the gap between capex and AI-generated revenue. Quarterly earnings and capex guidance from Amazon, Microsoft, Alphabet, Meta, and Oracle become the scoreboard for whether his thesis holds.
Source: Crypto Briefing
Trading involves risk.
Risk Disclaimer
